TY - JOUR
AU - Babiker,Mustafa H.
AU - Metcalf,Gilbert E.
AU - Reilly,John
TI - Tax Distortions and Global Climate Policy
JF - National Bureau of Economic Research Working Paper Series
VL - No. 9136
PY - 2002
Y2 - August 2002
DO - 10.3386/w9136
UR - http://www.nber.org/papers/w9136
L1 - http://www.nber.org/papers/w9136.pdf
N1 - Author contact info:
Mustafa Babiker
MIT
Joint Program on the Science and Policy of Global
Cambridge, MA 02139
Gilbert E. Metcalf
Department of Economics
Tufts University
Medford, MA 02155
Tel: 617/627-3685
Fax: 617/627-3917
E-Mail: gilbert.metcalf@tufts.edu
John Reilly
Joint Program on the Science
and Policy of Global Change
Massachusetts Institute of Technology
1 Amherst St. (Bldg. E40)
Cambridge, MA 02139
E-Mail: jreilly@mit.edu
AB - We consider the efficiency implications of policies to reduce global carbon emissions in a world with pre-existing tax distortions. We first note that the weak double-dividend, the proposition that the welfare improvement from a tax reform where environmental taxes are used to lower distorting taxes must be greater than the welfare improvement from a reform where the environmental taxes are returned in a lump sum fashion, need not hold in a world with multiple distortions. We then present a large-scale computable general equilibrium model of the world economy with distortionary taxation. We use this model to evaluate a number of policies to reduce carbon emissions. We find that the weak double dividend is not obtained in a number of European countries. Results also demonstrate the point that the interplay between carbon policies and pre-existing taxes can differ markedly across countries. Thus one must be cautious in extrapolating the results from a country specific analysis to other countries.
ER -